Wednesday, April 20, 2011

Experimenting with posting a few 60 min charts here. Let us know how you do/do not like it...

A quick look at the charts - Bank Of America and Citigroup Inc.

BAC, facing heavy selling pressure for 3 days now has helped me coin a new technical term - "gap and crap". BAC has had three days in a row of this unsightly phenomena, but managed to scrape an inside day the wall today. Lots of intraday reversal action is likely indicative of a search for "fair" value in the auction. Ac you can see from the chart below, it is still working off some overhead inventory. I posted some WAG* arrows to indicate possible inflection points. BAC is negative on so many time frames, value portfolio managers must be feeling really stupid here and they could be part of what's causing the further liquidations. Look for weak hands to get shaken out before making a move higher. Options action has not been overtly one way or the other, however, I did see what looked like some bull risk reversals going off in the July series. Pro traders have preferred to sell puts to play the long side intraday.

Next up is our old friend C, who will be getting a nose job, a face lift, and a tummy tuck in a few weeks when the stock reverse splits 10 for 1. We know C will still be the little ugly duckling inside though. C on the daily looks like it has bounced off support since its earnings release earlier this week. The numbers did not impress, however, and I'm not sure how much upside is available in the near term for this name. On that same point, I'm not sure I see the case for too much downside, although I think 10-15c of movement is probably in the cards over the next couple of days. With that kind of expectation you would think the options are reflecting a lack of concern for any serious action and you'd be exactly right. Options have looked sluggish at best and anemic at worst. Both C and BAC are working off declining tops lines and are facing lots of overhead supply. Nevertheless, if the BoE ever decides to raise rates we could see a little rally in here like when the ECB gave a nod to a modest bump.

* WAG - WILD ASS GUESS

I do have positions at this time, but they change constantly. Nothing here is advice, just commentary. I know my risk, you should know yours.

Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

2 comments:

Hey thanks for the comment. I personally like to take a shot at fading the extremes on a intraday basis. I use the context from the hourly and daily chart to help guide me as to when I get aggressive or when to let go. As an example about 2 days ago BAC was selling off into lows not seen since December. I watched the option flow and offered puts near the low. Once I sold them I already had a plan to buy them back at the Unch. if we got that far. We did and I closed it out. Some might have been encouraged by BAC making a strong move higher - to me I was aware that this is a stock in a downtrend (higher implied vol in puts which is why id rather sell puts than buy calls) and that bounces should be sold (or in this case puts bought). Everybody uses charts to enter trades differently. Knowing explicitly your set up and your trade plan will make it more clear for you. We will be doing a post on this in the future.

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This is trade analysis, not a recommendation.

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